Thursday, June 18, 2015

The legal question du jour is whether Congress should allow special voting procedures (fast track) for international trade agreement agreements negotiated by the executive branch. This brings forth the age-old debate of the merits of free trade, as if free or freer trade is at stake with fast track.

But that is jumping to conclusions without reading the text of the trade agreements.

Is Obamatrade another chapter in this saga, in which the federal government hinders economic growth and in the process convinces the experts to assert the opposite?

Reading the text of Obamatrade (specifically, the international trade agreements that would be fast tracked) is a better way of answering the question than extrapolating from the above historical pattern. But the text is secret.

Here are four educated guesses, that perhaps someday might be confirmed by reading the text.

There are some begger-thy-neighbor policies that are implemented when nations act unilaterally. Because they shrink the world economic pie, one might expect such policies be restricted by multinational agreements.

There are some internationally procompetitive policies that are implemented when nations act unilaterally. Multinational agreements set the stage for international collusion, which benefits the parties to the agreement but shrinks the worldwide pie and harms those not party to the agreement (the latter parties can be entire nations or parts of nations not represented). Some of the nations harmed might be small nations and African nations.

Rumor has it that financial services, which includes insurance, are part of the agreements. But there is no way that the Obama administration would allow foreign businesses to sell their health insurance products -- without politically correct elements like "free" birth control, deductibles ceilings, and regulated premiums. So expect the actual trade agreements to help prevent citizens from looking to foreign businesses to supply desirable products that are currently not supplied domestically.

Among world leaders, there is a near consensus to do a lot of bad economics in the name of "public health." E.g., to dishonor patents on pharmaceuticals and medical devices.

In my view one should seriously consider the possibility that the new and secret trade agreements make trade less free, rather than more.

Tuesday, June 16, 2015

Revealed preference speaks volumes. Admittedly, my hardcover version of Capital in the Twenty-First Century was delivered “for free” by the publisher of this periodical, but the opportunity cost of retaining it was extraordinary last spring when its publisher and distributors remarkably ran out of stock and the market for used copies was surging. I did more than retain it: I also purchased the electronic version so that I could search its contents readily and accurately and fit the 685-pager in a coat pocket.

More significantly, I read it, in some places carefully enough to dig into the appendices of its online appendices. The University of Chicago—my alma mater and employer—offered Thomas Piketty a faculty position in 1993, and to our disappointment he turned us down. For several years, Piketty’s (and Emmanuel Saez’s) inequality estimates have been used for teaching public economics at Chicago, and I have personally benefitted from his tutoring regarding the details therein. The students are hungry for data on inequality and its trends, and it is my privilege to help with the grocery shopping.

Supply and Demand (in that order)

The basic tools of supply and demand help immensely to understand and predict everyday events in our world. These days, many of those events are related to the Redistribution Recession of 2008-9. But I also look at other issues related to fiscal policy, labor economics, and industrial organization.